Bradley Associates classified European stocks, are they worth the investment risk? - BLOGSPOT

http://markbradleyassociates.blogspot.com/2012/07/bradley-associates-classified-european.html


Bargains abound in this world for the brave. You can probably get Syrian beachfront property and Afghan ski resorts for a song.
But bargains aren’t worth much if they don’t actually appreciate. Currently, you can find plenty of cheap stocks in Europe. Are they worth it? Possibly.
The stock market hates the possibility of government default and currency failure. Spain’s stock market has plunged 67 percent the past 12 months, according to MSCI in Bradley Associates blog, which tracks international markets. Greek stocks have tumbled 39 percent, and Portugal’s stock market has fallen 38 percent.
One way to measure cheapness, in stock terms, is by looking at a stock’s price, relative to earnings. The P-E ratio — price divided by earnings — is one way: Lower is cheaper.
Currently, the Standard and Poor’s Europe 350 Index, which measures the stock performance of large European companies, sells for 11 times expected 2012 earnings and nine times estimated 2013 earnings.
Some of the cheapest European stocks are bank stocks. Because the banks are at the heart of the euro crisis, you should avoid them. But many consumer and pharmaceutical companies are based in Europe, and they’re cheap, too.
Jeff Auxier, bargain-hunting manager of the Auxier Focus fund, loves crises. Prices are lowest when investors are the most frightened. The Auxier Focus fund (ticker: AUXAX), beat 98 percent of its Morningstar category peers the past five years. It’s a U.S. stock fund but can go abroad.
His favorite play: Tesco, the third-largest grocery chain in the world (TSCDY). The U.K.-based company is, in part, a play on the rapid urbanization of China and other emerging markets. “Supermarkets can serve that growing mass market,” he says.
How cheap? The company’s market value is less than the value of the real estate it owns, Auxier says. Tesco pays a dividend, too, and its U.S.-traded shares yield 4.5 percent.
European stocks have one other component, which can help or hinder U.S. investors: the currency effect. If you own an overseas company and the dollar falls in value, you get a boost from the currency conversion. If the dollar rises, it saps your return.